New Falls Corp. v. Lerner
| Decision Date | 26 September 2008 |
| Docket Number | Civil Action No. 3:05cv1716 (SRU). |
| Citation | 579 F.Supp.2d 282 |
| Court | U.S. District Court — District of Connecticut |
| Parties | NEW FALLS CORPORATION, Plaintiff, v. Edward N. LERNER, Defendant. |
Douglas Mark Evans, Richard M. Levy, Kroll McNamara Evans & Delahanty, West Hartford, CT, for Plaintiff.
Meghan K. Gallagher Thomas E. Katon, Susman, Duffy & Segaloff, New Haven, CT, for Defendant.
RULING ON MOTION FOR SUMMARY JUDGMENT
This case arises out of defendant Edward Lerner's alleged legal malpractice during his representation of Matsco Companies ("Matsco") in its enforcement of a financing, lease and security agreement with Alvin B. Olesh and Patricia Olesh. As assignee of Matsco's rights under those loan and equipment leasing agreements plaintiff New Falls Corporation ("New Falls") filed a legal malpractice suit against Lerner for his failure to perfect an attachment against the Oleshes' real property. Lerner seeks summary judgment on the ground that the legal malpractice claim was not transferred by the assignment agreement, or in the alternative, that California law, which expressly governs the assignment agreement, prohibits the assignment of legal malpractice actions. At the motion hearing held on November 29, 2007, I converted Lerner's motion to dismiss to a motion for summary judgment and requested supplemental briefing on the issues of: (1) New Falls' legal theory on how it obtained the right to bring suit against Lerner for legal malpractice and, (2) in the event that New Falls did obtain the right to pursue that claim, which state's law governs the effect of that transfer. Because I conclude California law, with its well-established prohibition on the assignability of legal malpractice claims, governs the issue of assignability, Lerner's motion is granted.
In November 1999, Alvin Olesh executed a master equipment financing, security, and lease agreement with Matsco, borrowing approximately $675,000.00 and leasing certain equipment for his dental practice. His wife, Patricia Olesh, guaranteed those obligations, contemporaneously executing a guaranty and a commercial pledge and security agreement with Matsco (collectively, the "Olesh Loan Agreements"). The Oleshes subsequently defaulted on those agreements. Matsco, through Lerner, filed suit in March 2002 against the Oleshes in the United States District Court for the District of Connecticut (hereinafter the "Matsco Action").
In connection with that suit, Lerner, on behalf of Matsco, filed an application for prejudgment remedy against the Oleshes, seeking an attachment in the amount of $927,250.10 on the Oleshes' real property located in Wilton, Connecticut. In November 2002, the court entered an order, based on a stipulation between Matsco and the Oleshes, which provided for a $500,000 prejudgment attachment against the Oleshes' Wilton property. According to New Falls, Lerner subsequently failed to take the proper steps under Connecticut General Statutes § 52-285 to perfect that attachment.
In January 2003, Matsco assigned all of its right, title and interest in and to the assets underlying the Matsco Action, including the Matsco Action itself, to Stornawaye Capital, LLC ("Stornawaye"). As a result of the assignment, Stornawaye was substituted as a plaintiff in the Matsco Action. New Falls alleges that Lerner continued to represent Stornawaye in that action, which Lerner does not concede. According to the docket sheet for the Matsco Action, 3:02cv452 (AWT), Lerner was Stornawaye's only counsel of record during the pendency of that suit.
On September 15, 2003, while the Matsco Action remained pending, Patricia Olesh filed for bankruptcy in the United States Bankruptcy Court for the District of Connecticut (hereinafter the "Olesh Bankruptcy"). As a result of that bankruptcy petition, on September 23, 2003, the court in the Matsco Action dismissed the case without prejudice to its pursuit in the bankruptcy court. In December 2003, Stornawaye filed a Proof of Claim in the Olesh Bankruptcy action in the total amount of $865,563.22, stating that its claim was secured by real estate collateral.
In February 2004, Stornawaye assigned to New Falls all of its right, title and interest in and to the assets underlying the Matsco Action. The assignment was evidenced by a Loan Purchase Agreement and the terms and conditions of the assignment were set forth in a General Assignment (collectively, the "Assignment Agreement"). Each document expressly stated that its terms were to be governed by the law of California. New Falls subsequently filed a Notice of Transfer of Proof of Claim and a Notice of Filing of Assignment of Claim in the Olesh Bankruptcy.
On April 12, 2005, the trustee in the Olesh Bankruptcy sold the Wilton property for $1,600,000.00, free and clear of all liens. All interests, claims, and liens on that property—including the Matsco Action prejudgment attachment—were transferred to the proceeds of the sale with the same validity and to the same extent and order of priority they had against the real property. On June 8, 2005 the trustee of the Olesh bankruptcy estate commenced an Adversary Proceeding against New Falls to avoid the prejudgment attachment pursuant to 11 U.S.C. § 544(a)(1), (2), and (3) on the basis that it was never validly perfected as required under Connecticut law. New Falls filed the pending suit against Lerner for legal malpractice in November 2005.
Summary judgment is appropriate when the evidence demonstrates that "there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed. R.Civ.P. 56(c); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) ().
When ruling on a summary judgment motion, the court must construe the facts in the light most favorable to the nonmoving party and must resolve all ambiguities and draw all reasonable inferences against the moving party. Anderson, 477 U.S. at 255, 106 S.Ct. 2505; Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986); Adickes v. S.H. Kress & Co., 398 U.S. 144, 158-59, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970); see also Aldrich v. Randolph Cent. Sch. Dist., 963 F.2d 520, 523 (2d Cir.1992) (), cert. denied, 506 U.S. 965, 113 S.Ct. 440, 121 L.Ed.2d 359 (1992). When a motion for summary judgment is properly supported by documentary and testimonial evidence, however, the nonmoving party may not rest upon the mere allegations or denials of his pleadings, but rather must present significant probative evidence to establish a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 327, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Colon v. Coughlin, 58 F.3d 865, 872 (2d Cir.1995). "Only when reasonable minds could not differ as to the import of the evidence is summary judgment proper." Bryant v. Maffucci, 923 F.2d 979, 982 (2d Cir.1991), cert. denied, 502 U.S. 849, 112 S.Ct. 152, 116 L.Ed.2d 117 (1991); see also Suburban Propane v. Proctor Gas, Inc., 953 F.2d 780, 788 (2d Cir.1992). If the nonmoving party submits evidence that is "merely colorable," or is not "significantly probative," summary judgment may be granted. Anderson, 477 U.S. at 249-50, 106 S.Ct. 2505.
The mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact. As to materiality, the substantive law will identify which facts are material. Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.
Id. at 247-48, 106 S.Ct. 2505. To present a "genuine" issue of material fact, there must be contradictory evidence "such that a reasonable jury could return a verdict for the non-moving party." Id. at 248, 106 S.Ct. 2505.
If the nonmoving party has failed to make a sufficient showing on an essential element of his case with respect to which he has the burden of proof at trial, then summary judgment is appropriate. Celotex, 477 U.S. at 322, 106 S.Ct. 2548. In such a situation, "there can be `no genuine issue as to any material fact,' since a complete failure of proof concerning an essential element of the nonmoving party's case necessarily renders all other facts immaterial." Id. at 322-23, 106 S.Ct. 2548; accord Goenaga v. March of Dimes Birth Defects Foundation, 51 F.3d 14, 18 (2d Cir.1995) (). In short, if there is no genuine issue of material fact, summary judgment may enter. Celotex, 477 U.S. at 323, 106 S.Ct. 2548.
In order to survive the pending motion for summary judgment, New Falls must demonstrate: (1) that it has a viable right to pursue a legal malpractice claim against Lerner as assignee of Stornawaye's rights, title and interest in the assets underlying the Matsco Action; (2) why California law, as the express choice of law in the Assignment Agreement, does not govern the assignability of a legal malpractice under that agreement; and (3) that Connecticut law would permit the enforcement of the legal malpractice claim in this case.
New Falls concedes that it never had a direct attorney-client relationship with Lerner and that its right to the claim is derived solely from its assignment agreement with Stornawaye. Therefore, the threshold issue...
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